FIRST OFF, let's acknowledge there is a problem. The oil and gas industry and the American public don't always see eye to eye on issues facing the country - for example, on hydraulic fracturing, which is necessary for developing shale resources, and on climate change, and whether or not hydrocarbons are a significant factor in exacerbating global warming.
There are arguments to be made on both sides of these issues, and even scientists disagree on major points, but clearly the petroleum business is not winning the PR battle with the public in the United States and globally. Many consumers, probably most, see oil and gas companies and their executives in a bad light.
Most people are sophisticated enough to view these issues in shades of gray rather than absolute terms. But for the petroleum industry the question remains: how do we change public perception, and is that even possible?
The industry can't afford to ignore this growing divide because public perception shapes political reality. The wider the gap becomes, the more draconian the regulatory environment for all industry sectors - upstream, midstream, and downstream - from the wellhead to the pump, or burner tip.
Consulting firm EY conducted a nationwide survey of US consumers earlier this year and a separate survey of energy executives and found that their views about the oil and gas industry vary widely, which is not exactly shocking news. I wrote about the results of those surveys in the June issue of OGFJ in which we compared and contrasted the views of consumers with that of industry executives. The survey results compel you to consider why there is such a marked difference between the two groups.
"The energy industry is providing products the public demands," says Deborah Byers, EY's US Energy Leader. "But clearly, there is a rift between what consumers want, how they want it, and the public's understanding of the industry. This gap poses a challenge for the future of oil and gas companies, and may influence their interactions with prospective employees, communities near current or future operations, shareholders, and even with consumers of energy products."
Partly as a result of the survey, EY has just released a report titled "How do we create a more refined view of oil and gas?" Surprisingly, to me at least, EY concludes that oil and gas companies have an opportunity to engage consumers and find common ground on a number of topics, including regulation.
Interestingly, the surveys show that 85% of consumers and 79% of oil and gas executives agree that regulations are necessary to prevent or minimize the impact of oil and gas accidents and spills. And 85% of consumers and 84% of executives agree regulations are necessary to ensure environmentally safe drilling practices.
The survey also showed that a large majority of consumers also say they are willing to pay more for a gallon of gasoline to ensure regulatory priorities are met, which undermines the argument that consumers would not pay more in a more regulated environment.
Here are a few more data points from the surveys:
• 40% of consumers and 90% of executives think tax reform will be good for the overall economy.
• 42% of consumers and 74% of executives think tax reform will be good for energy prices.
• 91% of consumers and 93% of executives believe climate change is real.
• 62% of consumers say creating alternative fuels is a major step toward addressing climate change.
• More than 75% of respondents say they are willing to pay more for gasoline if air and water quality regulations increase prices.
• While 41% of consumers believe the industry is underregulated, 53% of executives believe the industry is overregulated.
EY points out that, thanks to the shale boom, oil and gas companies are exploring, developing, and transporting products in and across markets less familiar with the industry. Increased public interface means a "social license to operate" is more important than ever before. The industry may also face challenges related to market share as technology makes new energy options accessible and affordable.
In a market with energy choices, EY says consumer preferences and attitudes are critical. Having a good reputation and being seen as an industry that shares consumers' long-term concerns and values will be necessary for oil and gas companies in an age of energy abundance.
"Consumer opinions are more important than ever," says Byers. "Public perceptions can impact the industry's ability to recruit and retain talent, access capital necessary for growth, and pursue new projects. They can also influence the regulatory and tax environment and, perhaps, even demand for oil and gas products. Americans' views on oil and gas serve as a reminder that companies need to proactively demonstrate value and earn trust."
The report highlights a disconnect between American consumers and the oil and gas industry. However, it also identifies areas in which there are overlapping interests - common ground that the industry can use to connect with consumers and improve understanding, communication, and its reputation.
The public views environmental protection and safety as critical issues. The survey shows that the petroleum industry places similar value on good environmental stewardship and safety performance. Tax fairness is another area where there is significant common ground between the two groups. Those are great starting points for opening up a dialogue on the role of oil and gas today and in the future.
